August 2024 Update: FinCEN Guidance on BOI Reporting for Real Estate Owners
On July 8, 2024, the Financial Crimes Enforcement Network (FinCEN) issued new guidance related to the Corporate Transparency Act (CTA), with specific implications for real estate owners. This update clarifies the Beneficial Ownership Information (BOI) reporting requirements and provides important details for those involved in real estate transactions and ownership.
Key Updates for Real Estate Owners:
- Beneficial Ownership Reporting Requirements:
- Who Must Report: The BOI reporting requirements apply to all entities classified as “reporting companies,” including those involved in real estate ownership. This encompasses both residential and commercial real estate entities.
- Reporting Obligations: Real estate owners must provide detailed information about their beneficial owners. This includes:
- Name
- Date of Birth
- Address
- Identification Number (e.g., passport or driver’s license number)
- Entities Affected: This requirement affects various types of real estate holding structures, including limited liability companies (LLCs), partnerships, and corporations that hold real estate.
- Reporting Deadlines:
- Existing Entities: Real estate entities that were in existence before January 1, 2024, must submit their BOI reports by the next reporting deadline established by FinCEN. This ensures that all beneficial owners are disclosed according to the new guidelines.
- New Entities: Real estate companies formed or registered on or after January 1, 2024, must file their initial BOI reports within the specified timeframe, even if the entity ceases to exist before the report is due.
- Criteria for Non-Existence:
- Formal Dissolution: For entities that have ceased operations, a formal dissolution process must be completed to avoid reporting requirements. This involves:
- Filing dissolution paperwork with state authorities.
- Receiving confirmation of dissolution.
- Settling any outstanding taxes and fees.
- Ceasing business operations and liquidating assets.
- Administrative Actions: Administrative dissolution or suspension alone does not fulfill the criteria for non-existence. Entities must ensure that dissolution is permanent to be exempt from reporting.
- Formal Dissolution: For entities that have ceased operations, a formal dissolution process must be completed to avoid reporting requirements. This involves:
- Implications for Real Estate Transactions:
- Due Diligence: Real estate owners and investors must perform due diligence to ensure that all reporting requirements are met for both current and past entities.
- Compliance: Non-compliance with BOI reporting requirements can result in significant penalties and legal issues. Ensure that your reporting practices are up-to-date and in accordance with FinCEN regulations.
- Steps to Ensure Compliance:
- Review Entity Structure: Examine the ownership and structure of any real estate entities you are involved with.
- Gather Required Information: Collect and verify all necessary beneficial ownership information.
- Submit Reports Timely: File all required reports within the deadlines to maintain compliance.
Additional Resources:
- FinCEN Guidance: For detailed information on the new BOI reporting requirements and how they apply to real estate owners, refer to the FinCEN’s official guidance document.
Legal Assistance: Consult with legal or compliance professionals to ensure that all requirements are met and to navigate any complexities related to beneficial ownership reporting.